Ask an Investor: Should I announce my funding?

Welcome to a new BetaKit weekly series designed to help startups and entrepreneurs. Each week, investors Roger Chabra and Katherine Hague tackle the tough questions facing founders today. Have a question you would like answered? Tweet them with the #askaninvestor hashtag, or email them here.

Congrats! You raised a round. The money is in the bank, and you’re about to hit the ground running. You’ve seen a lot of other founders announce funding rounds, and read about them every day on BetaKit. Should you announce your funding round publicly too? In this post, we’re going to cover everything you need to know to decide if a public announcement makes sense for you.

A lot of funding announcements are about ego more than anything else. Entrepreneurs wanting to pat themselves on the back for a job well done and show off publicly to their friends. My first piece of advice is not to make ego the reason for your announcement.

There are many great reasons to announce that could actually have strategic benefits for your business, make sure its one of these reasons driving your announcement:

1. To Get More Investment

Sometimes a round will do an initial close but still have additional room for more investors; perhaps another tranche of the round is being raised or a new fundraise being planned shortly down the road. Funding announcements tend to put you on the radar of other investors, and may lead to new sources of financing.

2. To Establish Credibility

An announcement of a large funding round may give partners and customers increased confidence in your company’s financial stability and can help you and your company be taken more seriously in the market.

3. To Get New Customers

In addition to making you seem more credible, getting media coverage for a fundraise can get your company in front of new potential customers. If this is one of you primary motivations to announce, be sure your announcement goes out in media very targeted around your audience. Selling to microbiologists? Maybe TechCrunch isn’t the right place to announce.

4. To Attract Speaking & Media Requests

As a funding announcement leads to a general perception of success, it also tends to lead to speaking and media requests. If you believe that these requests will lead to sales, funding or other benefits to your company an announcement may be in your interest. Note that these types of requests, when not properly filtered, can act as a big distraction, so proceed with caution.

5. To Recruit Talent

Recruiting the best people for your startup is always a challenge and announcing a fundraise may give you a leg up. If your company is actively recruiting post-fundraise getting some positive media coverage can be a way to advertise positions and attract top talent looking to get in on the ground floor of something big.

6. To Build Company Moral

As much as I encouraged you not to announce a funding round for your own ego, you may want to consider the positive impact an announcement might have on company moral. Investors always like to see positive coverage of their portfolio companies, because it gives them something to share with their partners. Similarly, employees often get a lot of pride out of seeing their company in the news.

While there are obvious benefits to announcing fundraising, there are also a number of valid reasons not to announce a raise. Here are the top four reasons not to announce, or to delay announcing, a funding round.

1. It’s Anti-climactic

Announcing a small round could actually lead to a negative perception of your company, making you seem smaller or less ambitious than the market may have otherwise perceived. Funding below $500K likely falls into this category, unless the funding comes from a very noteable investor. Hold the announcement until you’ve raised an amount that is substantial and newsworthy.

2. You’re Not Ready

Don’t announce if your product isn’t ready for attention. An announcement will lead people to your website so at a minimum your landing page is slick and ready to accept beta requests. Don’t send traffic to a bad landing page, or broken product. Most people will never come back and that will be what they remember of your product.

3. You’re Trying to Be Stealth

If you want to stay below the radar, not wanting to your competitors to see you as a major threat quite yet, delaying or forgoing an announcement may be in your interest.

4. There’s Nothing In It For You

If you don’t want more capital, see no benefit in getting on the radar of your competition and given your market don’t feel an announcement would lead to more sales, or better recruitment, then don’t announce. The announcement would be a distraction more than anything else.

You’ll need to weigh all of the pros and cons and make a judgment call on whether or not to announce based on what’s right for your business. An important thing to remember is that, generally, you need to do more than just write a blog post saying you raised to benefit from the announcement. Announcement benefits come from being covered by a large credible media source, properly targeted to the audience you want to reach. That means you need to treat a funding announcement like you would treat any other media effort.

Here’s how I’d recommend you approach the announcement. First, draft a press release with all of the key details of your raise, and be sure to get it approved by your investors as a courtesy. From here you have two options, set an embargo date and run the story by a number of writers — hoping a couple bite and right about the story on the embargo date. Or select one publication to give an exclusive on the story.

Unless you’re raising a massive series A or B round or there is something else very notable about your fundraise, I’d recommend giving the exclusive to one publication. It makes managing the logistics of the announcement much easier for you, and is a way of building a personal relationship with a writer — who will appreciate your giving them the exclusive.

In my opinion, you don’t need to hire an outside marketing or PR firm to help you with an announcement of this kind. In fact, writers will appreciate hearing from you the founder directly.

Roger’s Take:

If you do decide to announce your funding, you may want to include some other noteworthy developments about your company in the press release/coverage in order to maximize the impact for your company. Be sure not to try and stuff in too many developments (2 or 3 at the absolute most) but including some news about a major product launch, a big customer win(s), a revenue milestone (or year-over-year growth rate) or the size of your user base can help you get more press coverage and amplify the view of your company in your marketplace.

If you are in hiring mode, be sure to include a link to your careers page in your press release. A funding announcement is usually one of the best-trafficked pieces of content about a company and you want to make sure you leverage this traffic in the form of qualified candidates for your hard to fill positions.

Katherine Homuth is a serial entrepreneur, angel investor, and the founder of Female Funders, an online destination dedicated to inspiring and educating the next generation of female angels. She is the author of O’Reilly’s upcoming book, “Funded: The Entrepreneur’s Guide toRaising Your First Round”. Prior to leading Female Funders, Katherine founded ShopLocket —acquired in 2014 by PCH. Katherine has been named one of the Women to Watch in Wearables, one of Canada’s Top 100 Most Powerful Women and one of Flare’s Sixty Under 30. She has been quoted in the New York Times on fashion tech and was recently interviewed for the Oprah Winfrey Network. Find Katherine online at katherinehague.com.